Pershing Square thinks Herbalife should be "put to rest" whether it is or isn't a pyramid scheme.

Herbalife shares saw a slight dip on the headlines. Shares are up 1 percent on the session.

Release from Pershing Square:

Yet Another Herbalife Poll

The polling results recently released by Herbalife Ltd. (NYSE: HLF) contradict the results of two surveys previously released by the company â begging the question why it wonât simply release actual data that are collected by its distributors â and calling into question the accuracy of these survey results. The company continues to refuse to release these surveys to the public so that their assumptions, methodologies, and approaches can be analyzed.

We note that Herbalifeâs Nielsen survey relied on data from 349 respondents to determine the buying habits of 7.9 million Americans. Using surveys of a tiny fraction of the population which are then extrapolated to determine the occurrence of rare events for the population at large often leads to overestimates of actual results.

Herbalife Refuses to Release Actual Sales Data

Herbalife has incurred substantial expense in commissioning surveys while it has avoided collecting contractually available empirical data which would answer questions about the sales of Herbalife products to end consumers. Under its Sales & Marketing Plan, Herbalife requires all distributors to complete an official Herbalife Retail Order Form for each sale, a form which includes each buyerâs name, contact information, product purchased, and price paid. These records must be maintained by distributors for at least two years and provided to the company upon request.

If Herbalife wished to determine its actual retail sales and the profits earned by distributors on these retail sales, it can simply request the required Retail Order Forms from its distributors. Herbalifeâs refusal to obtain the actual empirical data which would answer questions as to the amount and profitability of consumer sales begs the question as to why Herbalife continues to attempt to rely on inherently unreliable and incomplete surveys as a defense to its being a pyramid scheme.

If Herbalife is a Legitimate Consumer Products Company, It Should be Tracking Retail Sales as Closely as Possible.

Even putting aside the legal requirements of collecting data about its customers, what legitimate consumer products company would not collect available empirical consumer data for research, sales, and marketing purposes if it could access this information?

Other direct sellers openly collect and report their empirical sales data. In a CNBC interview earlier this year, Tupperware CEO Rick Goings said, âOver 90% of our sales are through a retail customer. Only 10% to the sales force, and they buy that because we have so many new products every year.â When asked how he could be so confident in the numbers, Goings said, âWe have a report there of what happened the previous week, what the sales were, what the recruits were, who they were to and people that went to the party. We manage our businesses right down to the detail of it.â

Herbalifeâs Surveys Do Not Refute That It is a Pyramid Scheme

Whether Herbalife is a pyramid scheme depends on whether its distributors earn more from retail profits than from recruiting-related compensation. Since the surveys that Herbalife has commissioned only seek to determine whether adults have purchased Herbalife products â and not which products, the amount of products, or the prices paid â the surveys do not provide any information which could be used to determine the amount of retail profits, if any, that distributors have generated from these reported sales. Furthermore, Herbalife has refused to provide copies of either the Lieberman or Nielsen surveys to the public further limiting the publicâs ability to assess the companyâs claims. Herbalife products are offered for sale on the internet from numerous websites at large discounts, often as much as 45% off suggested retail prices with free shipping. The high degree of availability of discounted products calls into question the amount of actual retail sales that are occurring at suggested retail prices. Even if it were factually correct that 7.9 million Americans have purchased Herbalife products, only if those sales occurred at prices which enabled distributors to earn more from these sales than from recruitment rewards would this information be helpful to Herbalife in demonstrating that it is not a pyramid scheme.

A 1986 Permanent Injunction with the State of California Requires Herbalife to Track Retail Sales

Herbalifeâs failure to track actual retail sales puts the company squarely in violation of its 1986 consent decree with the State of California, which imposed a permanent injunction on the company. The injunction, among other things, prohibits Herbalife from operating a marketing program that pays compensation to distributors unless it is based upon âretail sales.â The order requires Herbalife to implement a system to âverify and documentâ sales of products and requires that "their records are current and accurate to a point in time which does not precede [a] request for verification or documentation by more than 90 days."

Regulators Should Investigate Herbalife Following Repeated Demands from Not-for-Profit Organizations and Federal and Local Legislators

Recently, the National Consumers League, the Hispanic Federation,

Congresswoman Linda Sanchez (CA-38), and New York City Councilwoman Julissa Ferraras (21st District â Queens) have called upon regulators to investigate Herbalife.

Councilwoman Ferraras wrote: âLatinos and others in my district are being unnecessarily harmed by [Herbalifeâs] aggressive recruitment techniques.â

Herbalife responded to Congresswoman Sanchez by stating that Herbalife offers an âexcellent business opportunityâ in order to âchange peopleâs lives.â But in a court filing on May 30, 2013 in Bostick v. Herbalife, a class action against the company, Herbalife said it âmade it clear to [Bostick] that only a small percentage of individuals similarly situated could expect to â as is true â generate significant income as a result of their relationship with Herbalife.â And âeven the top Herbalife distributors, on average, earn only a modest amount of income.â In Herbalifeâs recently revised Statement of Average Gross Compensation, the company admitted that 88% of distributors received no payments from Herbalife in 2012 â and that is before accounting for any expenses distributors incurred trying to profit from the business.

Herbalife wants it both ways â when recruiting, Herbalife aggressively promotes its âexcellent business opportunityâ to unwary consumers. When caught, Herbalife argues that everyone should know that it does not offer any meaningful chance of making money.

Pershing Square joins these non-profit public interest groups and members of our government in requesting regulators to promptly investigate Herbalife. If, in fact, Herbalife is a legitimate company, it should welcome a review of its business practices by the FTC, the SEC, and other regulators to put to rest whether or not it is a pyramid scheme.

About Pershing Square Capital Management, L.P. Pershing Square Capital Management, L.P., based in New York City, is a SEC-registered investment advisor to private investment funds. Pershing Square manages funds that are in the business of trading â buying and selling â securities and other financial instruments. Funds managed by Pershing Square are short the stock of Herbalife Ltd. Pershing Square may increase, decrease, dispose of, or change the form of its investment in Herbalife for any or no reason, at any time.